Cheap advice on MNC's fate: Don't worry--yet

PHILIP MOELLER

Now, the really big current issues are whether we will go to war over Kuwait, does the federal budget deficit really matter and will Twin Peaks last more than six weeks into the new television season?

This is the natural order of things, and I accept it as proper.

However, in the world I inhabit, by far the most pressing issue is whether Maryland National Bank will fail. I've been asked that question over the telephone, in elevators, parking lots, at the supermarket and at friends' homes.

My answer continues to be "no," but I'm hedging that response with more and more conditions these days. And I'm urging anyone with uninsured deposits (those exceeding $100,000) to either get them into an insured account or into another institution.

Am I being too pessimistic? I'd prefer the word cautious -- a position that's already been taken by major credit-rating agencies, which have decided that the debt securities of MNC Financial are not of investment-grade quality.

The facts that MNC has "junk" debt and that its fate is questioned tells me more than I want to know about these uncertain times. We have little or no faith in our institutions -- especially our financial institutions.

The banks and savings and loans should be the bedrock of our business system. But too many of them have become infected with the 1980s disease of excess -- the hunt for easy money and big returns on speculative and highly leveraged ventures.

We were raised to revere banks. The architecture of many bank buildings reflected the stability and strength that rested within, epitomized by gleaming and massive vault doors that swung noiselessly on oiled hinges. These were safe places for you and your money. They inspired respect and confidence.

Banks can't afford such brick-and-mortar symbols anymore, or much else, either. Today, our banking experience is pretty much limited to getting cash from an automated teller machine on the street or in a grocery store. Sure, it's convenient, but in the process of providing cost-effective banking services, the industry has lost much of what made it special.

Now, with the recognition that bankers can be short-sighted and greedy (hey, just like us!) the banks have sunk back into the pack of typical institutions.

Whoever said it was hard to get universal name recognition has obviously never worked at a troubled bank. Even the word "troubled" seems a coded way of saying soon-to-be bankrupt, teetering-on-the-edge-of-collapse or some other synonym for an institution that is croaking a lot like an ailing savings and loan.

Troubled institutions have a habit of going belly up instead of regaining their financial health. And it certainly seems fair to place Maryland National in the troubled category. So, it's understandable why people are worried.

Besides, there is very little straight stuff that people can depend on when it comes to dealing with the fate of a financial institution.

The folks over at Maryland National are just about legally obligated to tell you that current problems are no cause for alarm, that the bank is still sound and that the merger with Equitable Bank is already producing great benefits for customers and shareholders alike. Besides, your accounts are insured up to $100,000 by the Federal Deposit Insurance Corp.

The folks at the FDIC, the U.S. Comptroller of the Currency and other regulatory sources are just about legally obligated to tell you nothing about the condition of any specific financial institution.

The folks on Wall Street are just about legally obligated to tell you whatever they think will enhance their position, not yours.

So, the experts who want you to buy MNC Financial stock tell you things are improving with the recent resignation of Chairman Alan P. Hoblitzell Jr. and the infusion of capital by Alfred Lerner, the Cleveland executive who parlayed his controlling interest in Equitable into a large stake in MNC and, more recently, into Mr. Hoblitzell's job.

And the experts who want MNC stock to decline in price do their best to convince you and anyone else who will listen that this terrible turmoil at the bank is, sadly, a prelude to even worse times. Better not wait for MNC's third-quarter results to come out, they say. Better not take the chance that MNC directors will be forced to trim or omit the company's fat cash dividend on its stock.

With so many people having different agendas, it's tough for even the experts to get a handle on MNC's problems, let alone the ordinary people with savings accounts, certificates of deposit and other funds at Maryland National and American Security in Washington.

They don't have the time or money to hire high-priced financial experts or to read informed newsletters. Without access to talented people, they turn to me -- the prince of cheap advice.